Assume a Firm Faces These Costs: Total Cost of Capital

Assume a firm faces these costs: total cost of capital = $4,000; price paid for labor = $20 per labor unit; and price paid for raw materials = $8 per raw-material unit. If the firm can produce 2,000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials, what are the total cost (TC) and average total cost (ATC) of producing the 2,000 units of output?

A) TC = $4,000; ATC = $4.00
B) TC = $8,000; ATC = $5.00
C) TC = $12,000; ATC = $6.00
D) TC = $15,000; ATC = $8.00

Correct Answer:

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